Strategy for the future

A total rethink of our approach to innovation within hi-tech industries is vital to ensure UK firms can continue to compete internationally, says James Raby

IN recent years the government has invested in many innovation-themed campaigns and funds headlined by such phrases as ‘co-ordinated’ and ‘focused’, which target one element or issue at a time. But these are in fact part of the problem of un-integrated thinking which is limiting to innovation. These ‘initiatives’ for me conjure up the image of a giant sneeze of unstructured government spending.

A recent report from the National Endowment for Science, Technology and the Arts (NESTA) calls for a total re-think of the approach to innovation within hi-tech industries to ensure UK firms can continue to compete internationally.

The report warns that some companies in sectors such as aerospace, pharmaceuticals and automotive are unprepared for the ways in which international competitors are becoming more innovative. While established firms fail to respond quickly enough to competition, new entrants from emerging economies are often free to come up with radically innovative solutions. The ability of UK firms to develop new business models, organisational forms and processes therefore becomes increasingly important.

To deal with the impending threat from emerging economies, NESTA advocates ‘Total Innovation’ — the integration of innovation in new technologies, products and processes with innovation in new services, business models and organisational forms.

The Sainsbury Management Fellows’ Society (SMF) welcomes NESTA’s findings. The report recognises that true globally leading innovation requires much broader thinking, encompassing human skills, economic dynamics, political and international factors and, most importantly, how technology impacts all of these.

We can no longer consider innovation as an incremental or ‘non-core’ activity, hidden away in R&D or held in new product incubators like some form of communicable disease. This is often justified by company boards as a means to minimise risk, but is perhaps more an acknowledgement of a lack of information and understanding of how to manage it. The risk of change in the global market is, however, less than the risk of not changing.

New technology and new international markets, even with existing customers, usually require completely different organisational, marketing and business models. yet many companies continue to control and segment their activities and staff in ways that match the market of the 70s. Such boundaries in teams and responsibilities inevitably leads to incremental steps and failure due to an inability to break through an unsustainable compromise to profitability.

Non-incremental thinking requires structures, individuals and teams of people (including the board) with the ability to synthesise and translate all the factors simultaneously into a unified assessment of the risks and rewards, envision new business forms, make the decision and deliver the plan. Even if matrix teams are used, the specialist bias of our own education systems and personal networks tend to recreate these islands of analysis.

The UK is woefully lacking in technology and innovation translators; those who can speak the language of both technology and business. The report has highlighted that innovation is not only being impeded by a lack of people with science. technology, engineering and maths skills, but also because these skills are rarely fused with business knowledge. What’s more, those in technical and creative roles operate in silos, divorced from participating in the marketing, strategic, or financial decisions.

These elements of the business model cannot merely be applied like a veneer, hermetically sealing the dangerous change inside, as they all are integral to the success of NESTA’s vision.

Technical experts are facing a glass ceiling in UK companies, through lack of business skills. This is seriously impairing our ability to compete with China and India where the traditional and specialist skills-based industrial structures have never developed and been institutionalised. As the report highlights, technical experts need to broaden their skill base — firms need to nurture management, marketing, leadership, change and project management skills across technical experts. otherwise the UK will not be able to effectively compete internationally.

It is imperative that skills developing for innovation should not, and cannot, be seen solely in the context of a separate effort or continuing professional development. Training must be integral to any firm’s innovation process, linked directly to its strategic goals.

Do a quick check on your company. How is the financial success of training towards improving innovation measured except in terms of ‘Was this useful’? Where is the training ‘pot’ in the budget — somewhere down towards the bottom next to stationery, or within the New Product Development line?

James Raby is from the Sainsbury Management Fellows’ Society